Chapter 1.3, 1.4, 1.5

Positive economic statements:

Can be proved or disproved by reference to facts.

The earnings of workers _____.

Depend on the highest degree earned

The economics profession thrives because:

Economic models help to explain complicated scenarios in a better way than other alternative approaches.

A simplification of economic reality that is used to make predictions about the real world is known as a(n)_____.

Economic theory

To predict the effect of an economic event on economic choices, economic theories _____.

Focus on the average behavior of people in groups

What is the first step in the scientific method used to study economic problems?

Identifying relevant questions and defining relevant variables.

What illustrates the ceteris paribus assumption?

If the price of Pepsi decreases and there are no changes in other relevant variables such as consumer income, weather conditions, etc., we know that the decrease in price increased the quantity of Pepsi demanded.

Identify a positive economic statement.

If the price of automobiles increases, then the quantity demanded decreases.

A feature of an economic theory is

It does not spell out every detail and interrelation.

An economic theory is characterized as a good theory if:

It helps in sorting and understanding information.

Which of the following is an example of the fallacy that association is causation?

Jolynn observes that whenever she waters her plants, it rains. She concludes that watering the plants is causing the precipitation.

The median pay of economics majors increased

More in dollar terms than any other majors in 2015.

Which of the following is a normative economic statement?

The distribution of income in the United States should be more equal.

The incorrect belief that what is true for the individual is also true for the group is known as:

The fallacy of composition.

Which of the following is an example of the fallacy of composition?

The manager of a company offered a better compensation package to an employee after reviewing his performance in only one project.

To test a hypothesis is the last step

Under the scientific method of studying economic problems.

A(n) _____ is a measure, such as price or quantity, that can take on different values at different times.

Variable

_____ can predict the impact of an economic event on economic choices.

An economic theory

What illustrates the application of the scientific method to economics?

An economist wonders whether unemployment tends to be higher among teenagers than more experienced workers, makes a few necessary assumptions, formulates a hypothesis, and gathers data to test the hypothesis in the model.